Ford Motor Company (F), General Motors Company (GM): Just How Important Is the Chinese Auto Market?

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Ford Motor Company (NYSE:F) plans to enter the Chinese premium market by introducing its Lincoln brand next year.

Another new entrant into the premium market will be Tesla Motors Inc (NASDAQ:TSLA). Tesla plans to start delivering its Model S to Asian customers later this year. It should be interesting to see how well this longer-range electric-vehicle does in the Chinese premium market.

Takeaway

With big waves of its 1.3 billion people (19% of the world’s population!) moving into the middle and affluent classes, the importance of the Chinese auto market can’t be overstated. Not only is it already the largest overall auto market, but its premium market is growing at a rate that’s on track to make it the largest market by 2020. Some industry experts predict China could account for 40% of the global premium market by 2020!

Automakers’ profit margins are considerably higher on premium autos than more moderately priced ones. Thus, automakers that win the fast-growing Chinese premium auto market will likely get a nice boost to their overall profitability over the long-term.

Volkswagen AG (ADR) (OTCMKTS:VLKAY) is a must-look for long-term investors given its Audi brand is the favored premium brand in China, and its profitability is tops. Ford Motor Company (NYSE:F)’s, General Motors Company (NYSE:GM)’s, and Tesla’s progress in China are also worth following.

BA McKenna has no position in any stocks mentioned. The Motley Fool recommends Ford and General Motors. The Motley Fool owns shares of Ford.

The article Just How Important Is the Chinese Auto Market? originally appeared on Fool.com.

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